Activist shareholders had proposed the group sell off its US arm

The board of embattled First Group has rejected calls from an activist shareholder to break up the train and rail operator.

The company’s board, led by chairman John McFarlane, has told Sandell Asset Management it does not agree with its latest proposals to carve up the company, which involved selling off First’s US arm.

Sandell published a letter on July 1 criticising management, led by chief executive Tim O’Toole, saying the company had “significantly underperformed” and that its increased remuneration was not “deserved”.

The charges from Sandell, which holds 3.1pc of the FTSE 250 company’s shares, were similar to those levelled by the US activist in December last year.

It is believed the board of First has written to Sandell to dismiss its charges.

Sources this weekend suggested that the board is of the belief that although there is much work to be done, the turnaround being led by Mr O’Toole is beginning to bear fruit.

Last Thursday First issued a trading statement in which it said its transformation programme was “progressing well”.

The rebuttal to Sandell comes ahead of First’s annual meeting in Aberdeen on Wednesday. The board has been braced for a pay revolt, after three separate pay advisory bodies said that First’s remuneration report, which detailed a near-£2m package for Mr O’Toole, should be rejected.

However it is expected the “no” vote will be around the 20pc-mark, lower than the 30pc vote against last year.